Question

Problem 8-21 Schedules of Expected Cash Collections and Disbursements [LO8-2, LO8-4, LO8-8] You have been asked to prepare a December cash budget for Ashton Company, a distributor of exercise equipment. The following information is available about the company's operations: a. The cash balance on December 1 is $53,400. b. Actual sales for October and November and expected sales for December are as follows: Cash sales Sales on account October November December $ 27.000 $ 81,200 $ 87,800 $ 435,000 $538,000 $544,000 oo Sales on account are collected over a three-month period as follows: 20% collected in the month of sale, 60% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible c. Purchases of inventory will total $341,000 for December. Thirty percent of a month's inventory purchases are paid during the month of purchase. The accounts payable remaining from November's inventory purchases total $165,000, all of which will be paid in December d Selling and administrative expenses are budgeted at $516,000 for December. Of this amount. $94,900 is for depreciation e. A new web server for the Marketing Department costing $121,500 will be purchased for cash during December, and dividends totaling $13,000 will be paid during the month. 1. The company maintains a minimum cash balance of $20,000. An open line of credit is available from the company's bank to increase its cash balance as needed. Required: 1. Calculate the expected cash collections for December 2 Calculate the expected cash disbursements for merchandise purchases for December 3. Prepare a cash budget for December Indicate in the financing section any borrowing that will be needed during the month. Assume that any interest will not be paid until the following month Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 1. Calculate the expected cash collections for December 2. Calculate the expected cash disbursements for merchandise purchases for December

Answer 1

Schedule of Expected Cash collections
December cash sales		87,800
Collections on account
October sales	(455,000*18%)	81900
november sales	(538,000*60%)	322800
december sales	(644,000*20%)	128800
total cash collections		621,300
Schedule of Expected cash disbursement
Payments to Suppliers:
November purchases		165,000
December purchases	(341,000*30%)	102300
total cash disbursement		267,300

Therefore requirement 1 &2

Total cash collections $621,300

Total cash disbursements $267,300

Ashton company Cash budget For the month of december 998 999 1000 1001 1002 1003 1004 1005 53,400 621,300 674,700 1006 1007 1008 1009 1010 1011 267,300 421,100 121,500 13,000 Beginning cash balance Add collections from customers total cash available less cash disbrsements payments to suppliers for inventory Selling and administrative expenses New web server dividends paid total cash disbursements Excess(deficiency) of cash available over disbursement Financing: Borrowings Repayments interest total financing Ending cash balance 822,900 -148,200 168,000 1012 1013 1014 1015 1016 1017 1018 1019 1020 1021 1022 1023 1024 168,000 20,000 Depreciation is non cash expenditure, therefore we excluded it Minimum 20,000 cash balance shall be maintained at the end of december. But there is a deficiency of $148,200 To maintain 20000 cash balance we need to take financing = 148,200 +20,000 = 168,200

Ashton company Cash budget For the month of december 998 999 1000 1001 1002 1003 1004 1005 1006 1007 1008 1009 1010 1011 53400 621300 =+E1003+E1004 Beginning cash balance Add collections from customers total cash available less cash disbrsements payments to suppliers for inventory Selling and administrative expenses New web server dividends paid total cash disbursements 267300 =516000-94900 121500 13000 =+SUM(D1007:D1010) Excess(deficiency) of cash available over disbursement =+E1005-E1011 168000 1012 1013 1014 1015 1016 1017 1018 Financing: Borrowings Repayments interest total financing Ending cash balance =+E1014-E1015-E1016 20000